Fairfax Financial Holdings Limited (Symbol-FFH)

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zinfit
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by zinfit »

Seems like Prem has been pretty good at making bit time bets. What happens if one of these big bets go against him? I can't help but think of Corzine and MF Global.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

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Gosh zinfit, that's a pretty big slur.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by Bylo Selhi »

George$ wrote:My view on FFH (and on investing?)... They have demonstrated they are capable of independent, - not herd like - analysis and thought. Thus I'm willing to ride out the dips with FFH that are sure to come.

About RIMM. I don't know... I respect and admire Lazarides as a human being.
Looks like a meeting of the minds: Prem Watsa: Meet the man behind the RIM shakeup. "Fairfax has been buying RIM stock and is now among its largest shareholders." Maybe Prem made Mike an offer he couldn't refuse ;)

And maybe now Mike will have even more time to spend on his real passion: PI :thumbsup:
Sedulously eschew obfuscatory hyperverbosity and prolixity.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Press Release today
TORONTO, ONTARIO--(Marketwire - Jan. 27, 2012) - Fairfax Financial Holdings Limited (TSX:FFH)(TSX:FFH.U) will hold a conference call at 8:30 a.m. Eastern Time on Friday, February 17, 2012 to discuss its 2011 year-end results which will be announced after the close of markets on Thursday, February 16 and will be available at that time on its website http://www.fairfax.ca. The call, consisting of a presentation by the company followed by a question period, may be accessed at (800) 857-9641 (Canada and U.S.) or 1 (517) 308-9408 (International) with the passcode "Fairfax".

A replay of the call will be available from shortly after the termination of the call until 5:00 p.m. Eastern Time on Friday, March 2, 2012. The replay may be accessed at (866) 351-5756 (Canada and U.S.) or 1 (203) 369-0058 (International).

Fairfax Financial Holdings Limited is a financial services holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance and investment management.
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Prem Watsa

Post by Shine »

Prem says...what say you?

Prem Watsa is sticking to his bearish views – at a price.

The investor’s decision to hedge Fairfax Financial Holdings Ltd. ’s stock portfolio in the belief that equity markets are due for a decline cost the company $780-million.

Mr. Watsa has been increasingly vocal about his prediction of a lengthy period of deflation. The ongoing debt crisis in Europe, weakness in the United States and housing problems in China are poised to send markets down sharply for a prolonged period, he says.

But markets in general have been rising, and Mr. Watsa has been paying the price. The U.S. S&P 500 Index is up nearly 8 per cent so far this year, while Toronto’s stock market has risen more than 4 per cent.

The Fairfax chief executive, who made billions from his call on the 2008 financial crisis, is sticking to his bet. Most investors are too optimistic right now, he said in an interview on Thursday.

“We don’t feel comfortable with our common stock position without it being fully hedged,” he said. “We think for the long term, 10 years, stocks will be very, very good. But the next few years we have to be very careful.”

He points specifically to China, where “the real-estate bubble has been pricked.”

“Most people tend to think that the Chinese government will be able to hold it,” he said. “Our experience is it’s very tough, once you prick a bubble, to stop it from coming down significantly.”

And he’s concerned other major global forces are rapidly reaching a boiling point.

“We have stocks in our portfolio that we like a lot, but in the next few years we’re worried about China and Europe, these are big markets, and housing has still got a lot of problems in the U.S.,” he said. “So we are still very cautious.”

He suggested that too many investors are reacting to headlines rather than fundamentals.

“The markets are very focused on the short term, on some good number that’s come from the United States or elsewhere, and if another number comes out that’s not good the market will react in a negative way,” Mr. Watsa said.

“In October they thought things were so weak, three months later they think the world is a good place.”

Fairfax reported its fourth-quarter and year-end financial results Thursday. It lost $771.5-million in the final three months of the year as its investment portfolio bled $914.9-million. Bonds accounted for almost $100-million of the drop, but the majority of losses stemmed from the hedges on its stocks. (The hedges are designed to offer a counterweight to the stocks, and will make money if their prices decline, to protect Fairfax from declining stock markets).

Fairfax is so pessimistic that, by the end of December, it had hedged its portfolio to the tune of 105 per cent, meaning it is essentially shorting the stock market or betting that it will go down. But markets rose significantly towards the end of last year.

For the full year, Fairfax turned a profit of $45.1-million, a result with which Mr. Watsa says he’s content, considering it was the second-worst year for industry-wide catastrophe losses around the world. The Japanese tsunami, New Zealand’s earthquake, and flooding in Australia and Thailand were among the disasters that ate into the insurance industry’s collective balance sheet to the tune of $105-billion.

“When you have really bad catastrophe losses, worst-case events, we’re willing to lose a maximum of one year’s worth of income, which is basically what happened here,” Mr. Watsa said.

As a result of the rise in catastrophes, insurance premiums are also rising, and so now is actually a good time to be writing such business, Mr. Watsa added.

“The big advantage is that when this happens, pricing goes through the roof. The pricing in Japan has gone up very significantly, and pricing in Thailand is going up. When I say ‘significantly,’ I’m talking 50 to 100 per cent, big price increases.”

While Fairfax’s equity hedges cost it in the fourth quarter, they earned money in the third quarter when markets slumped. All told, the company lost $379-million on stocks during 2011. But its overall investment portfolio had net gains of $691.2-million thanks to more than $1.2-billion in gains on bonds. In addition, it made a further $705-million on interest and dividends.

Mr. Watsa said the single best asset class to be in during 2011 was U.S. long-dated treasuries, and Fairfax had a pile of them.

And he is urging Fairfax’s investors to keep their eye on the long term.

Fairfax’s book value remained roughly flat last year, including the dividend. But “if you look at the last five years, our book value has compounded at 19.5 per cent, and over the last 26 years our book value has compounded at 23.5 per cent per year,” Mr. Watsa said.

“No one has even come close to that in our industry.”
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Re: Prem Watsa

Post by AltaRed »

Where is the link to the source of this material?
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Re: Prem Watsa

Post by Shine »

AltaRed wrote:Where is the link to the source of this material?

Sorry for not posting the source - it is on Globe Investor Gold and I thought the rules did not allow one to post such a link and apart from that the link might not work for those not registered.

Anyway here's the link:

http://gold.globeinvestor.com/servlet/A ... ck_url=yes

regards
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Re: Prem Watsa

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Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by Norbert Schlenker »

Gretchen Morgenson (NYTimes) wrote:... The $400 million matter involves Fairfax Financial Holdings of Toronto, an insurance company that has battled some big-name adversaries on Wall Street.

The brains behind Fairfax is V. Prem Watsa, sometimes called the Warren Buffett of Canada. Mr. Watsa recently joined the board of Research in Motion, the struggling Canadian maker of BlackBerrys.

Long before that, however, Mr. Watsa’s team at Fairfax was busy doing something else: reducing its American tax bill. Thanks to a complex stock deal that ran from 2003 to 2006, the company received a $400 million tax benefit.

How? Mr. Watsa’s company offset income from a profitable reinsurer subsidiary, the Odyssey Re Holdings Corporation, against losses at Fairfax. Under I.R.S. rules, companies can file so-called consolidated returns only if they belong to the same parent corporation and if one owns at least 80 percent of the other.

Trouble was, Fairfax didn’t own 80 percent of Odyssey back in 2003. To reach that threshold, it needed to buy 4.3 million Odyssey Re shares, then trading on the New York Stock Exchange.

Fairfax could have paid cash for the stock — $78 million at the time. But that’s not what it did. Instead, it wrote a $78 million i.o.u. maturing in 2010 to an affiliate of Bank of America in the Cayman Islands. Bank of America then borrowed $78 million of Odyssey Re shares in the open market and transferred them to Fairfax, which reimbursed the bank for its costs. Over the next three years, Fairfax got its tax benefit.

The question that has dogged this transaction is whether Fairfax really owned those Odyssey Re shares when it claimed its tax benefit. If it did, that $400 million savings was fine. If it didn’t, the I.R.S. could come calling...
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NormR
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by NormR »

This must be the second or third time the tax thing has come up. Gretchen is several years late on this one. (And looks like a bit of a tool of the short hedgies, IMHO.)
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by NormR »

Norbert Schlenker wrote:Thanks to a complex stock deal that ran from 2003 to 2006, the company received a $400 million tax benefit.
Also well past the statue of limitations, no? (IIRC, it's 3 years in the US)
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by DanH »

NormR wrote:
Norbert Schlenker wrote:Thanks to a complex stock deal that ran from 2003 to 2006, the company received a $400 million tax benefit.
Also well past the statue of limitations, no? (IIRC, it's 3 years in the US)
That could depend. While our tax laws differ significantly from U.S., there are many similarities. In Canada, there is a similar statute of limitation for CRA to go back and reassess a return. However, if you've knowingly under-reported or mislead CRA, I don't think there's any limit. Based on the IRS' recent threats to many Canadian residents that hold American citizenships, I suspect Fairfax could still be exposed to this risk if no statutory limit applies.

Not saying that IS the case but floating the notion that it might.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Yesterday was my first Fairfax AGM meeting at the Roy Thomson Centre here in Toronto.
Saw Norm there - was any other FWF member there?

I found the event and Prem Watsa in particular most impressive. There were about two hours of questions and answers with Prem - with his grace, patience, energy, candour and information. RIM came up.

The 2011 annual report and earlier ones are available here.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Some more views and thoughts from Prem Watsa (and Fairfax?) via Bloomberg

Watsa, Who Models Buffett, Sees Housing Bubble: Corporate Canada
In part ....
During a three-hour meeting at Roy Thomson Hall in which he answered questions from dozens of investors, Watsa said he prefers stocks over bonds in the “short-term.”

He also favors “good companies” that have the potential to double in value, such as Wells Fargo & Co., Johnson & Johnson and U.S. Bancorp. Watsa said Fairfax, with about $24 billion in investments, plans to hold those companies for five to 10 years.

The Toronto-based insurer more than doubled its stake in BlackBerry maker Research In Motion Ltd. (RIM) in January to 26.85 million shares. RIM has fallen 90 percent since its mid-2008 peak as the company loses market share for its products to Apple Inc. and Google Inc.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Click here to view the 2012 Annual Meeting Slide Presentation by Prem Watsa at Fairfax AGM on April 25. (41 overheads)
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by CROCKD »

Watsa making bet on penny stock - Bank of Ireland

Current P/B = 0.427. One commentator sees its book value declining to 15 Euro cnts/share which at current price is P/B = 0.626
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by parvus »

Many Moons Later, the I.R.S. Questions a Tax Deal
Close readers of this column may recall that Fairfax, an insurer, received a sweet $400 million tax benefit through a complex transaction that ran from 2003 to 2006. Tax experts have questioned the deal for years, but Fairfax has defended it — as it did in this space in March.

Then, in a bolt from the blue, the I.R.S. issued an opinion in June. In a memorandum providing generic legal advice to I.R.S. agents, the service sided with the skeptics. It said that the terms of the transaction failed the most basic test required under tax laws to generate the $400 million benefit.

While the memo did not identify the company — such discretion is the I.R.S.’s custom — the details in the eight-page opinion show that it is clearly based on the Fairfax deal. Experts in the tax world say that there have been no other deals exactly like this one.
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George$
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Recently Prem Watsa published his annual Fairfax letter (18 pages)

Like Warren Buffett's letter - I always find it informative and educational.

The first few sentences in this one -
To Our Shareholders:

We had an excellent year in 2012, even though it was not that obvious in the numbers, as our book value per
share increased by only 61⁄2% (including the $101 per share dividend paid in 2012) because of our very cautious
view of financial markets. Even though book value per share ended the year at only $378 per share, up from $365
per share at the end of 2011, and common shareholders’ equity ended the year at only about the $7.7 billion level
it first reached two years ago, intrinsic value increased significantly. Our results have always been lumpy. In the
three years 2007 – 2009, we earned $3.4 billion after taxes and book value per share increased by 146%. Since
then, book value per share has increased by only approximately 10% (including dividends) because of our very
cautious view of the financial markets (which has led us to be 100% hedged in our common stock portfolios) and,
of course, the unprecedented catastrophes in 2011. We ended the year with cash and marketable securities at the
holding company in excess of $1 billion.

In the 27 years since we began in 1985, our compound annual growth in book value per share has been 23%,
while our common stock price has compounded at 19% annually.

While until late last year, 2012 looked like a light year for catastrophes, Hurricane Sandy then came, causing
devastation on the northeast coast of the U.S. Total economic damages could well be in excess of $50 billion
while insured damage is expected to be in the range of $25 – $30 billion. And Hurricane Sandy was really only a
tropical storm when it made landfall! A category 3 or above hurricane which follows the path of Sandy and slams
into New York City is the U.S. industry’s big nightmare. Sandy is expected to cost us about $261 million – mostly
from OdysseyRe.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by Springbok »

George - I saw your post about Watsa's comments on Blackberry. Fairfax apparently owns 10% of BB/BBRY and that is equivalent to something like 24% of their equity holdings! Quite bet. I also have some BB, so I hope Fairfax is right! But, I also read this article which is less positive!
http://www.valuewalk.com/2013/03/prem-w ... -ltd-bbry/

Regarding Fairfax itself. I have never looked at it, but do see it in the corporate bond listings, usually with one of the highest yields amongst investment grade bonds. As a result, assuming an equally high risk level, I have bypassed Fairfax. Considering their large bet on Blackberry, perhaps Fairfax is a risky bet?

Is Fairfax something you are invested in?
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by FinEcon »

Springbok wrote:George - I saw your post about Watsa's comments on Blackberry. Fairfax apparently owns 10% of BB/BBRY and that is equivalent to something like 24% of their equity holdings! Quite bet. I also have some BB, so I hope Fairfax is right! But, I also read this article which is less positive!
http://www.valuewalk.com/2013/03/prem-w ... -ltd-bbry/

Regarding Fairfax itself. I have never looked at it, but do see it in the corporate bond listings, usually with one of the highest yields amongst investment grade bonds. As a result, assuming an equally high risk level, I have bypassed Fairfax. Considering their large bet on Blackberry, perhaps Fairfax is a risky bet?

Is Fairfax something you are invested in?
An investor needs to read up a bit if you want to understand a firm like Fairfax. At least read what George posted (the lastest letter), that wll clear up your misunderstandings and will also give you an idea of the application of the methodology behind the firm's sucess.
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Springbok wrote: ... Is Fairfax something you are invested in?
Yes, I hold some Fairfax - and I hold some Berkshire. At $8 billion Fairfax is about 3% of Berkshire in value. Wasta is younger than Buffett.
Their great annual meeting event is in Toronto - never been to Omaha. So it goes.

Excluding dividends - at present I'm down about 2% with Fairfax from what I paid.

I will stay with Fairfax and hope it will do well. Never a guarantee. :?

Added later -
Just checked - at $384.79 - I'm down just 1.39% from what I bought at. :)
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by Springbok »

FinEcon wrote:
An investor needs to read up a bit if you want to understand a firm like Fairfax. At least read what George posted (the lastest letter), that wll clear up your misunderstandings and will also give you an idea of the application of the methodology behind the firm's sucess.
I did read the company letter. I posted the part that concerned me and others (large investment in BB, high yield bonds).

Which part did I misunderstand?
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Quite a day for both Blackberry and for Fairfax.

FFH jumped up 2.45% today to $393.00

BB jumped up 8.10% today to $16.01

It seems they are probably coupled together this time - the BB result has driven up FFH. :shock:
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by George$ »

Hi:

I own some Fairfax and plan to go to the AGM on April 11 (start 9:30 am) at Roy Thompson Hall in Toronto. I was there last year and impressed - a mini Berkshire meeting? :)
http://www.fairfax.ca/news/events-and-w ... fault.aspx

Anyone else from this group coming?

George
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Re: Fairfax Financial Holdings Limited (Symbol-FFH)

Post by ig17 »

Norm's report from Fairfax AGM:

Prem Watsa counsels cash as markets continue their climb

Of note: deflation warnings.
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